Global clean energy investment levels continued to languish in 1Q12, with project finance, venture capital investment and public market listings all falling to historically low levels. Project finance totalled $34.4 billion in 1Q12, its lowest level since 3Q10, while venture capital and private equity investment (excluding buyouts) reached $2.0 billion, its lowest level for three years. Activity in the public markets was equally bleak. In 1Q12 Clean Energy companies secured a paltry $871 million on the public markets, the lowest level recorded since 1Q09.

On a more positive note, a series of particularly large acquisitions boosted the total value of M&A transactions to $19.4 billion in 1Q12, more than doubling the $9.5 billion transacted during the corresponding period last year. There are also encouraging signs that project development activity is taking off in emerging markets – project finance volumes in South America totalled $3.2 billion in 1Q12, its highest ever quarter of project finance activity.

Project finance still reeling from the Eurozone crisis

Global clean energy project financing volumes flat lined in 1Q12 at $34.4 billion, in line with 4Q11 but over 10% below the $38.3 billion recorded during the corresponding period last year. The year-on-year decline is largely due to banks reining in new lending in response to the European sovereign debt crisis. To put this into context, clean energy project financing in the last two quarters totalled $69 billion, 29% below the $97.8 billion recorded in the previous two-quarter period.

Europe suffered the most last quarter as a damaging cocktail of deteriorating project debt financing conditions and subsidy cuts hit home. Germany was a prime example, with clean energy project financing falling over 50% to $622 million in 1Q12 compared to 4Q11. North American clean energy project finance activity was also impacted by the Eurozone crisis, declining 20% on the prior quarter to $7.4 billion.

On a more positive note, there are encouraging signs of growth in emerging markets – clean energy project financing in South America totalled $3.2 billion in 1Q12, double the 2011 quarterly average of $1.6 billion. This was underpinned by an increase in wind energy project financing in Brazil , which accounted for 56% ($1.8 billion) of total clean energy project financing in South America in 1Q12.

"Emerging markets started to come alive during the first quarter of the year," commented Douglas Lloyd, CEO of Clean Energy pipeline. "Above all it suggests a broader comfort level with the sector among the international banking community."

Japanese buyers take M&A centre stage

Global clean energy M&A activity totalled $19.4 billion in 1Q12, a 31% increase on the $14.8 billion recorded last quarter and more than double the $9.5 billion transacted in the corresponding period last year.

The increase was caused by a surge in large deals – eight $500 million plus clean energy M&A transactions totalling $11 billion were announced in 1Q12, compared with only three totalling $3.8 billion in 4Q11. Confirming the increased maturity of the sector and in acknowledgement of the rapid pace of consolidation during the last few years, total announced M&A deal numbers declined to 235 in 1Q12. This was 9% below 4Q11 and 18% less than the same quarter last year.

1Q12 was particularly notable for an increase in outbound investment from Japanese trading houses and industrial corporations. Japanese companies announced $2.1 billion worth of acquisitions of non-Asian clean energy companies in 1Q12, over twice the 2011 quarterly average of $1.0 billion.

The majority of this international activity involved the acquisition of large-scale renewable energy infrastructure projects, such as Mitsubishi's purchase of the HelWin 2 and DolWin2 offshore wind transmission assets in March 2012.

Venture capital & private equity investment slips to two-year low

Global venture capital and private equity investment in clean energy (excluding buyouts) totalled $2.0 billion in 1Q12, a 13% decrease on the $2.3 billion recorded in 4Q11 and 38% below the three-year quarterly average of $3.2 billion. Venture capital and private equity investment is now at its lowest level since 2Q09. The decrease would actually have been more severe had it not been for the $420 million Series D financing round secured by US clean coal company GreatPoint Energy, which is one of the largest clean energy financing rounds ever recorded in the sector.

Early-stage venture capital investment exhibited the most substantial decline. Only $727 million of venture capital funding was allocated to companies raising Series A-C rounds in 1Q12, 42% below the three year quarterly average of $1.26 billion.

"High profile bankruptcies across the solar supply chain have sent venture capital funds running for the hills," commented Lloyd. "Nearly every solar transaction in 1Q12 involved late stage companies that had already secured significant funding. Early-stage companies in the sector didn't stand a chance."

Public market listings slump to three-year low

Clean energy companies only secured $871 million on the public markets globally in 1Q12, comprising IPOs, secondaries and convertible notes. This is more than 50% below the $2.0 billion secured in 4Q11 and substantially below the two-year quarterly average of $5.0 billion. This decrease means that clean energy public market activity is now at its lowest level since 1Q09. A marked decline in Chinese IPO activity, which has kept globally public market listing levels afloat in recent years, accounted for this decline. Only six Chinese IPOs totalling $494 million were completed in 1Q12, compared with nine totalling $2.4 billion during the corresponding period last year.

European and North American public listings also suffered, securing $37 million and $340 million respectively in 1Q12. This is 97% and 65% below their respective two-year quarterly funding average. The poor performance of many IPOs executed in 1Q12 goes some way to explaining the limited appetite to list at the moment. Agricultural biotech company Ceres Inc., US biofuels producer Renewable Energy Group and US solar micro inverter manufacturer Enphase Energy all completed IPOs in 1Q12 but raised significantly less funding than anticipated.

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